Enbridge approves 120,000 b/d expansion of Gray Oak Texas oil pipeline

Enbridge has given the green light for a 120,000-b/d expansion of its Gray Oak long-haul Texas pipeline, following a successful open season to export incremental barrels to global markets from marine docks at the US Gulf Coast, CEO Greg Ebel said Aug. 2.

The midstream player has also taken a final investment decision for the proposed Blackcomb natural gas pipeline that will be designed to transport 2.5 Bcf/d of feedgas from the Permian Basin to an export facility on the USGC, Ebel said on the company's second quarter 2024 earnings webcast.

"There is a growing demand for crude oil and natural gas, with producers seeking more egress," he said. "We have had record Mainline volumes [in Western Canada] and Ingleside [in Texas]. While gas producers in the Permian are seeking the much-needed egress out of the basin."

On May 9, Enbridge launched an open season seeking additional barrels on its Gray Oak pipeline that transports light crude from Crane in Texas to Corpus Christi on the USGC. The 850-mile pipeline has a nameplate capacity of 1 million b/d.

The company also plans to add another 2 million barrels of storage at its purpose-built Enbridge Ingleside Energy Center crude oil export facility at Corpus Christi and increase the overall crude storage capacity to 20.5 million barrels by 2025, Ebel said.

Lastly, Enbridge has also acquired two docks and nearby land adjacent to EIEC from fellow midstream entity Flint Hills Resources with a price tag of $200 million, providing future growth opportunities that optimize existing operations and create ready growth headroom for multiple products.

"The Gray Oak expansion will be fully online in 2026 and incremental volumes will serve our Ingleside facility, which had a record quarterly volume of crude exports and a single-day loading of over 2.3 million barrels," Ebel said.

The EIEC is "advantaged in many respects" for crude exports and "we have another 1 million b/d of crude volumes coming from the Permian", President of Liquids Pipelines Colin Gruending said on the same webcast. "That facility has moved over 3 million b/d of crude out of the docks."

Crude exports from the USGC averaged 4.2 million b/d in July, S&P Global Commodities at Sea data shows. Of that, 1.1 million b/d originated from the Enbridge Ingleside terminal, a record high, CAS data shows.

Exports from Ingleside have climbed from 659,000 b/d in April. CAS data shows only US-origin crude being exported from Ingleside.

Overall, the solutions that Enbridge is providing to producers in the US and Canada for their need to move barrels to markets at a low cost is yielding results with the Mainline once again reporting a record throughput quarter, Ebel said.

Light and heavy barrels on the Mainline last quarter stood at 3.078 million b/d, a 74,000-b/d increase over 2.991 million b/d in the same quarter the prior year, Enbridge said in its earnings release.

The 3,000-mile Mainline pipeline system transports Canadian heavy and light barrels from Edmonton to Gretna on the Canadian-US border where the volumes flow onto Enbridge's Lakehead system that supplies crude oil to refineries in PADD II (US Midwest) and further on to PADD III (USGC).

Growing production from the Western Canadian Sedimentary Basin has resulted in Mainline volumes being apportioned last quarter with that scenario continuing into the fall as Enbridge spares no efforts to maintain its guidance of average 2024 throughput volumes of 3 million b/d on the pipeline system, Ebel said.

"For long-term egress out of Western Canada, given the strength in supply and appetite to get to the US markets, we are designning a 150,000 b/d expansion of the Mainline. This will come into effect by late 2026 and will be very economical," Gruending said without giving any figures.

A prime reason for WCSB seeking access to US markets is a better pricing and also dealing with negative price differentials for their heavy barrels.

"With new pipeline access, we don't expect base differentials to be blowing up again," Gruending said.

Western Canadian Select at Hardisty, Alberta averaged at a $14.56/b discount to WTI in July, widening slightly from a $13.29/b discount in June, Platts assessments show. However, that was tighter from a $25.44/b discount in November, prior to the line fill for the Trans Mountain crude pipeline expansion.

Platts is part of S&P Global Commodity Insights.

Blackcomb expansion

In the Permian Basin, Enbridge announced an FID for Blackcomb Pipeline, an up to 2.5 Bcf/d natural gas pipeline which will provide transportation service from Rankin, Texas to the Agua Dulce area in South Texas providing much needed export capacity for Permian shippers, Ebel said.

"We closed the 19% acquisition in an integrated Permian natural gas pipeline and storage joint venture with Whistler, which is immediately accretive and directly connected to our existing infrastructure at Agua Dulce. This investment is already yielding additional growth opportunities through FID of Blackcomb Pipeline which is expected to provide much needed egress for Permian natural gas shippers in 2026," Ebel said.

Private firm WhiteWater Midstream will construct and operate the 365-mile, 42-inch diameter Blackcomb Pipeline, it announced late July 31.

The second half of 2026 start date is subject to "the receipt of customary regulatory and other approvals," it said.

"Whistler has a track record of project deliveries on time and budget and they have a strong operating history," Enbridge's President Gas Transmission and Midstream Cynthia Hansen said on the same earnings webcast.